National Association of Christian Ministers Leadership Series
By D. Holland, D. Maddox, Michael Mooney, A. Powers, M. Reynolds
Liberty University, MBA
Organizational Decision Making #
Herein is a summary of major research findings regarding the subject of decision making within groups and organizations. #
Making organizational decisions is a complicated matter that can be mastered through prototypical approaches and understanding of hindrances.
This presentation will examine two standard approaches:
1) Behavioral Decision Making, an approach that considers social equity and behavioral tendencies to make best use of the circumstances at hand (Geller, 2009; Robinson & Kerr, 2009; Howell, 1966).
2) Strategic Decision Making, an approach that uses quality information, tools, and protocol to make good decisions (Gudonavicius, Bartoseviciene & Saparnis, 2009).
In Organizational Decesion Making (ODM), the most difficult decision are those with the greatest risks.
High Stakes Decisions (HSD) are such that usually contain a large potential loss of some resource (tangible or intangible) with few options to reverse the decision (Kunreuther & Meyer (2002).
It is better to approach HSD with the council of a group that undergoes continued training (Proverbs 24:6; Blinder & Morgan, 2005; Brodbeck, Kerschreiter, Mojzisch, & Shulz-Hardt, 2007).
It is also important to note that heuristics often result in biases that hinder effective ODM (Das & Teng, 1999).
In all of these things, it is most important that believers rely on God to assist them in making decisions (Pro 16:25).
Behavioral Decisions:
Cultivating courage is more complex and less straightforward than developing competence and commitment. Specifically, individuals with greater competence and commitment in a given situation are more likely to demonstrate courage. Thus the propensity to show courage under certain circumstances is increased whenever relevant competence or commitment is augmented (Geller, 2009, p. 45).
“Legitimation” of power is helpful in unmasking the potential human cost and possible long-term damage or extreme leadership episodes within organizations (Robinson & Kerr, 2009, p.875).
The skill of ‘satisficing’, as defined takes on a different quality in the systems context. The reason for using the satisficing concept derives from the various limits to rationality, important amongst which are emotional and attitudinal behavior. Since these non-rational elements have greater scope when the area of uncertainty is greater, more sophisticated systems analysis will reduce the areas of uncertainty, leaving less scope for non-rational factors in evaluating data and in the consequent decisions. The task of any administration is so to design the manager’s environment ‘that the individual will approach as close as practicable to rationality (judged in terms of the organization’s goals) in his decisions (Howell, 1966, p. 150).
Strategic Decisions:
According to Gudonavicius, Bartoseviciene, and Saparnis (2009) correct strategic decisions must be decided in order to implement a formed strategy (p.75).
“Quality decisions may be perceived as a function of imperatives (requirements, regulations, orders, sophistication, and knowledge) based on information needed” (2009, p.76).
Decision making formula is defined as “Decisions = f (imperatives + information)” (2009, p.76).
Top tools utilized in strategic decision making.
Stenfors, Tanner, Syrjanen, Seppala, and Haapalinna (2007) indicated SWOT analysis, spreadsheet applications, balanced scorecard, and risk analysis as the top instruments utilized in decision making (p.932).
SWOT Analysis – Evans and Wright (2009) indicates this tool is the most used and consist of assessing the strengths, weaknesses, opportunities, and threats that may affect an organization, which defines a clear basis of a company’s strategic position (p. 10).
Spreadsheet Applications – Stenfors, Tanner, Syrjanen, Seppala, and Haapalinna (2007) believes this is used supplementary to the other tools (p.932).
Balanced Scorecard – Basic reasons for implementing a scorecard are “the need to track progress toward achieving organizational goals, to align employee behavior with an organization’s strategic objectives, to communicate strategy to everyone in a clear and simple manner, to measure performance at different levels, and ability to measure people, projects and strategies” (Lawson, Stratton, & Hatch, 2006, p.37).
Risk Analysis – Bryant and Dunford (2008) defined risk as ‘the extent to which there is uncertainty about whether potentially significant and/or disappointing outcomes of decisions will be realized” (p.337). Additionally it is, “the ability to identify, assess, and manage risks and uncertainties is necessary for effective decision making, because the costs associated with bearing and managing risks and uncertainties must be weighed against the potential return from those decisions” (Csiszar, 2008, p.3).
Behavioral Decision Making vs. Strategic Decision Making
Each intervention requires individual courage for interpersonal interaction with others. Conscientiousness is facilitated while cultivating courage. Additional traits needed for decision makers are caring person-status, belongingness, empowerment and culture (Geller, 2009, p.43) .
An organizational environment that identifies opportunities for subjective processes in problem solving. This trait of individuality does allow time for creative thinking. Other than primary decision criterion, the display pattern allows for creativity and sequential patterns in the search for alternatives (Fleming, 1966 p. 51).
People often use self-talk to avoid impulsive at-risk behavior and work for long-term goals (Mischel, 2004, p. 186).
A Strategic decision making model is decentralized, it relies on entrepreneurial actions by the leaders of decentralized units. Decisions are made by coordinating committees to try to bring unity to the organization. This approach focuses on scientific propositions about organizations instead of the people who belong to them. It is difficult to separate strategy and an organization from an economic, managerial, and legal perspective. Distinctions between strategy and organization collapse eventually and the only thing that survives is a configuration of information.
Strategy in terms of three increasingly complex layers of information (termed as the 3-Cs’):
a. Coordinated sets of actions, that are;
b. Comprehensive; and
c. Conditional. (Cyert & Williams,1993 ,p.6)
Making High Stake Decisions
No matter the type of decision either Behavioral or Strategic, making high stake decisions are difficult and have risk associated with them.
Raiffa, Howard, Kenney, and Hammond (1998) suggest that the fault of some ineffective decisions is the mind of the decision-maker (p.2).
According to Kunreuther and Meyer (2002), high stake decisions have two distinct properties.
The existence of large financial or emotional prospective loss outcome(s) (p.261).
The presence of high costs to reversing a decision once it is made (p.261).
Various factors impact making good high-stake decisions.
According to Kunreuther and Meyer (2002), subjects either insufficiently utilize or ignore probability information (p.261).
Hutchison (2001) implies that humans have difficulty considering the long-term consequences of current actions.
According to Hammond (2000), stress can enhance performance during high-stake decision making, by making better use of existing salient cues.
Stress can also be harmful. Researchers have developed the following tips for making high-stake decisions more effectively:
Raiffa, Howard, Keeney, and Hammond (1998) suggest to avoid anchoring by gathering information from other sources after thinking the problem through on your own (p.1).
Gathering statistics can prevent overestimating or forecasting (1998, p.1).
Since how decisions are made are mostly analyzed by studying individuals, Zeckhauser and Vicusi (1990) suggest that better theories at organization and group level should be developed by researchers. Thus, is the reason group size, composition and effects are studied.
Group Size, Composition and Effects on ODM
Group decisions are better than individual decisions. Blinder and Morgan (2005) conduct experiments that show that “group decisions are on average better than individual decisions” (p. 789).
Training enhances the ability of a group to make decisions. Brodbeck, Kerschreiter, Mojzisch, and Shulz-Hardt (2007) explain that group decision making outperforms individual decision makers especially when the group is trained in group decision making (p. 474).
Less personnel usually = increase in quality supervision. Cummins and King (1973) point out that “the more personnel a supervisor has to supervise, the less time he has to spend with each person” (p. 88). Highly structured tasks with close supervision can positively effect productivity if the supervision is perceived as “supportive” (p. 88).
Heuristic Model of Group Decision Making.
Gist, Locke, and Taylor (1987) prove a heuristic model of small group interaction. Size, ability, personality, gender, and race all influence the way a group, or organization, makes decisions (p. 237).
Groups with broad knowledge of topics perform better. Rulke and Galaskiewicz (2000) conclude that a group made up of members with a broad knowledge of the group topics outperformed groups that were made up of members with highly specialized knowledge of the topic.
There are no perfect groups nor teams (Field, 2009, p. 3). Group size and the make up of its members all effect ODM.
There are also many hindrances to Organizational Decision Making.
Hindrances to Organizational Decision Making
Toxic Decision Process: A “decision makers’ anxiety and apprehension about an issue may delay a decision action, which can in turn intensify others’ anxiety and generate tension in an organization” (Maitlis & Ozcelik, 2004, p. 391).
False Consensus: “the tendency to overestimate the degree of similarity between self and others may result in biased judgments or decisions” (Jones & Roelofsma, 2000, p. 1134).
Group Think: “a five-step causal model: antecedents of groupthink, concurrence seeking, symptoms of groupthink, decision-making defects, and poor decision outcomes” (Hogg & Hains, 1998, p. 37).
Cognitive Biases: are defined as “a negative consequence of adopting heuristics. Biases entice decision makers away from making optimal decisions in terms of utility maximization” (Das and Teng, 1999, p. 760).
Along with Hindrances, Heuristics and Biases are associated with Organizational Decision Making.
Heuristics and Biases
Biased Assimilation: “Research is evaluated more favorably if it supports initial attitudes” (Masnick & Zimmerman, 2009, p. 30).
Omission Bias: “the tendency to avoid actions that carry some risk but that would prevent a larger risk” (Stanovich & West, 2008, p. 680).
Status Quo Bias: When people “tend to choose an alternative they chose in a previous decision situation, even if it is no longer the optimal choice” (Kempf & Ruenzi, 2006, p. 211).
Planning Fallacy: The propensity to underestimate the amount of time necessary to complete a task (LeBoeuf & Shafir, 2009).
Escalating Commitment: The increasing commitment “to a losing course of action [, it] is usually attributed to a need on the part of decision makers to maintain the illusion that they have not erred (Jones & Roelofsma, 2000; Whyte, 1986).
Biblical Worldview -Don’t worry
Peter teaches that believers should tell the Father of their troubles because He cares (1 Pet 5:7). God is concerned with anxieties, such which are often caused by the need to make high risk decisions.
Jesus said that not even one sparrow falls to the ground without the Father’s interest in knowing it (Mat 10:29).
It is not God’s will that His children be troubled with worldly fears, but rather to have peace (Joh 14:27).
Indecisiveness leads to restlessness, and long enough in this condition can lead to instability (James 1:8).
James instructs believers to ask God for directing wisdom, declaring that it is His pleasure to provide it abundantly (James 1:5).
Often the answer has already been provided in the Bible (Psa 119:105).
Leave the consequences to God
In the midst of abstract situations where it is difficult to get clarity about how to respond, it becomes all too easy to rely upon human reasoning that leads astray (Pro 16:25).
However, God’s ways and thoughts are not like those of finite men (Isa 55:8).
Solomon’s wisdom is that believers should not rely solely on their human reasoning, but rather to acknowledge God in their decisions with the expectation that He will offer providential direction (Pro 3:5-6).
No matter what decision is made, the children of God can rest assured that He is in control of the outcome (Pro 16:9, 33), and Working all of it together for His sovereign goodness (Rom 8:28).
Therefore believers can rest assured that God who takes pleasure in walking with them directs their paths (Psa 37:23-25)!
Conclusion
God is sovereign over all decisions.
Either a behavioral approach or strategic approach to decision making impacts the outcomes.
Group size and composition effect organizational decision making.
Training enhances organizational decision making to avoid hindrances and contribute with high stakes decisions.
There is right and wrong in organizational decision making.
Answers to decision can be found in the Bible.
References
Blinder, A., & Morgan, J. (2005). Are two heads better than one? Monetary policy by committee.. J. Money, Credit Banking, 37, 789-811. Retrieved May 25, 2009, from EBSCO Publishing Citations database.
Brodbeck, F., Kerschreiter, R., Mojzisch, A., & Shulz-Hardt, S. (2007). Group decision making under conditions of distributed knowledge: The information asymmetries model. Academy of Management Review, 32, 459-479. Retrieved May 25, 2009, from EBSCO Publishing Citations database.
Bryant, P., & Dunford, R. (2008). The influence of regulatory focus on risky decision-making. Applied Psychology: An International Review, 57(2), 335-359.
Csiszar, E. (2008). Managing risk and uncertainty. Business & Economic Review, 55(1), 3-7.
Cummins, R., & King, D. (1973). The interaction of group size and task structure in an industrial organization. Personnel Psychology, 26, 87-94.
Cyert, R.M., & Williams, J.R. (1993). Organizations: Decisions and strategy: Overview & comment. Strategic Management Journal, 14, 5-10. Retrieved June 7, 2009, from EBSCO Business Source Complete.
Das, T., & Teng, B. (1999, November). Cognitive biases and strategic decision processes: An integrative perspective. Journal of Management Studies, 36(6), 757-778. Retrieved May 24, 2009, from Business Source Complete database.
Evans, C., & Wright, W. (2009). The “how to…” series. British Journal of Administrative Management, (65), 10–11.
Field, A. (2009). Diagnosing and fixing functional teams. Harvard Management Update, 1-6. Retrieved May 25, 2009, from Business Source Complete database.
Fleming, J. (1966). Study of a Business Decision. California Management Review, 9l(2), 51-56.
Geller, E.S. (2009, May). Courage, culture & interpersonal intervention. Professional Safety, 54(5), 43-51. Retrieved June 1, 2009, from Academic Search Complete.
Gist, M., Locke E., and Taylor, M. (1987). Organizational behavior: Group structure, process, and effectiveness. Journal of Management, 13(2), 237-257.
Gudonavicius, L., Bartoseviciene, V., & Saparnis, G. (2009). Imperatives for enterprise strategists. Engineering Economics, 61(1), 75-82.
Hammond, K. (2000). Judgments under stress. New York: Oxford University Press.
Hogg, M., & Hains, S. (1998, May). Friendship and group identification: A new look at the role of cohesiveness in groupthink. European Journal of Social Psychology, 28(3), 323-341. Retrieved June 8, 2009, from Academic Search Complete database.
Howell, W. (1966, May). Managers and Systems. Journal of Management Studies, 3(2), 150-162.
Hutchinson, W. (2001). ‘‘Bumbling geniuses: The power of everyday reasoning in multistage decision making.’’ In Wharton on Making Decisions, S. Hoch and H. Kunreuther (eds.), New York: John Wiley.
Jones, P., & Roelofsma, P. (2000, August). The potential for social contextual and group biases in team decision-making: Biases, conditions and psychological mechanisms. Ergonomics, 43, 1129-1152. Retrieved June 7, 2009, doi:10.1080/00140130050084914.
Kempf, A., & Ruenzi, S. (2006, December). Status quo bias and the number of alternatives: An empirical Illustration from the mutual fund industry. Journal of Behavioral Finance, 7(4), 204-213. Retrieved June 8, 2009, doi:10.1207/s15427579jpfm0704_3.
Kunreuther, H., & Meyer, R. (2002). High stakes decision making: Normative, descriptive and prescriptive considerations. Marketing Letters, 13(3), 259-268.
Lawson, R., Stratton, W., & Hatch, T. (2006). Scorecarding goes global. Strategic Finance, 87(9), 35–41.
LeBoeuf, R., & Shafir, E. (2009, January). Anchoring on the here and now in time and distance judgments. Journal of
Experimental Psychology / Learning, Memory & Cognition, 35(1), 81-93. Retrieved June 8, 2009, doi:10.1037/a0013665.
Maitlis, S., & Ozcelik, H. (2004, July). Toxic decision processes: A study of emotion and organizational decision making. Organization Science, 15(4), 375-393. Retrieved May 30, 2009, doi:10.1287/orsc.1040.0070.
Masnick, A., & Zimmerman, C. (2009, April). Evaluating scientific research in the context of prior belief: Hindsight bias or confirmation bias. Journal of Psychology of Science & Technology, 2(1), 29-36. Retrieved June 8, 2009, doi:10.1891/1939-7054.2.1.29.
Mischel, W. (2004). Toward a integrative model for CBT: Encompassing behavior, cognition, affect and process. Behavior Therapy, 35, 185-203.
Raiffa, Howard, Keeney, R. L., & Hammond, J.S. (1998, September-October). Thinking about the hidden traps in decision-making. Harvard Business Review, 1-2.
Robinson, S. K., & Kerr, R. (2009). The symbolic violence of leadership: A critical hermeneutic study of leadership and succession in a British organization in the post-Soviet context. Human Relations, 62(6), 875-903.
Rulke, D., & Galaskiewicz, J. (2000). Distribution of knowledge, group network structure, and group performance. Management Sci, 46(5), 612-625. Retrieved May 25, 2009, from EBSCO Publishing Citations database.
Stanovich, K., & West, R. (2008, April). On the relative independence of thinking biases and cognitive ability. Journal of Personality and Social Psychology, 94(4), 672-695. Retrieved June 8, 2009, doi:10.1037/0022-3514.94.4.672.
Stenfors, S., Tanner, L., Syrjanen, M. , Seppala, T., & Haapalinna, I. (2007). Executive views concerning decision support tools. European Journal of Operational Research, 181(2), 929 – 938.
Whyte, G. (1986, April). Escalating commitment to a course of action: A reinterpretation. Academy of Management Review, 11(2), 311-321. Retrieved June 8, 2009, from Business Source Complete database.
Zeckhauser, R. J., & Viscusi, W. (1990). ‘‘Risk Within Reason,’’ Science, 248, 559-564.
